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Third-party financing: a path for medical practices to thrive in an era of cost-shifting and declining revenues


These are especially difficult times to run a solvent—much less profitable and growing— independent or specialty medical practice.

A study released by the American Medical Association (AMA) in May 2021 showed that for the first time ever, a majority of physicians no longer work in private practice. The largest two-year increase of doctors jumping from small to large practices measured by the AMA survey since 2012 occurred between 2018 and 2020.

A separate survey from the Physicians Foundation conducted in July 2020 found that 8% of physicians had already closed their practices just five months into the Coronavirus pandemic, while 43% had reduced staff—with more than half of these practices experiencing losses of at least a quarter of their income.

Of the estimated 16,000 medical practices that shuttered in the early months of the pandemic, “the majority (76 percent) were private practice owners or partners” in small, independent practices, according to the survey. “The great majority of physicians will not leave medicine as a result of Coronavirus health risks,” the authors concluded, “but may be more likely to leave for economic reasons.”

In the Coronavirus era, some of the most endangered practices are specialties that don’t easily lend themselves to telehealth, or those that rely substantially on revenue generated from elective procedures, which are being curtailed because of avoidance of health care settings and staffing shortages, among other reasons.

Smaller practices may be less equipped to weather extreme economic pressures compared to hospital systems and large academic medical centers, because they usually have fewer revenue streams and may be more susceptible to cash flow disruptions. Layer on top of that insurance cost-shifting trends, and it adds up to additional burdens on small practices to get fully reimbursed for services they provide.

The proliferation of high-deductible insurance plans has made the patient the new payer. Out-of-pocket health expenses for Americans now surpass $400 billion annually, according to the Centers for Medicare and Medicaid Services. An AMA report from July found that collection agencies last year held a staggering $140 billion in unpaid medical bills. And this number is low, measuring only delinquencies already sold off. Medical debt is America’s leading cause of bankruptcy, according to the National Consumer Law Center.

To be sure, the financial pressures facing independent medical practices predated the pandemic. But the unique phenomenon of Coronavirus – filling urgent care centers while emptying elective surgery wards – has accelerated the consolidation trend.

According to AMA data, 72 percent of physicians owned their own practices in 1988. Now that number is down to 46 percent. In the face of so many challenges, what are those who value the independent practice of medicine to do?


To control their professional destiny, they must adapt and become as innovative with their financial instruments as they are with their medical instruments. Large health systems may be able to afford teams of financial professionals to focus on reimbursement and revenue, but in today’s lean environment, smaller practices are more likely to be focused on squeezing out enough revenue to meet a reduced payroll.

Some practices have adapted to cost-shifting trends by allowing patients to pay their bills in installments, but this type of direct patient financing can further stress revenue cycle management (RCM) as payments once rendered in days are now stretched over months. And if patients don’t pay, practices must either absorb the losses or make a significant human and revenue investment to collect these costs. This is not a sustainable solution.

Fortunately, small practices have new options to explore third-party patient financing to help patients plan for how they will pay their medical expenses – both expected and unexpected – while themselves receiving rapid payment and no-recourse financing from a financial partner.

There are many third parties entering the health care finance realm but having a firm understanding of the needs of providers and patients is crucial for success. Health care financing is not a simple plug-and-play solution in an electronic health record. Hospitals and health systems should consider the commitment to the space and knowledge of the intricacies of how health care organizations operate, from elective procedures to general health and wellness.

Health care organizations should also consider whether their partners will be able to anticipate and innovate new financing options that will integrate with existing infrastructure while also being able to adapt to the practice’s changing needs.


For small practices, training medical support staff to have more granular conversations about payment and finance options at the time of service can be the difference between obtaining or foregoing care.Recognizing that every patient’s financial situation is as unique as their health care condition is important. Not everyone wants to or can pay for care the same way.

Health-only financing options are attractive to patients because they offer a chance to compartmentalize health and wellness expenses in one place. Third-party patient financing is equally attractive to small practices because it gets them out of the debt collection business and boosts their revenue cycle management through guaranteed payment in just a few days instead of up to a month with a traditional credit card—or potentially much longer (or not at all) with an in-house installment plan. And as consumers come to further understand the payment options available to them, a third-party financial partner can create additional consumer patient loyalty and, importantly, an improved patient experience.

Patients recognize that their responsibility for health care costs is growing. They already expect conversations and more transparency around their care costs and are seeking new ways to pay for the care they need, when they need it. In this new age of payment portals and online financial transaction platforms, third-party patient financing can now be offered by integrating a solution into the electronic health record and accessible through a patient’s online portal.

As Coronavirus, consolidation and cost-shifting challenge providers in new ways – as insurance companies pull back on specialty offerings and patients pull back on discretionary health spending – independent practices shouldn’t be overly burdened with calculating and collecting monthly payments, keeping delinquent accounts on the books, and eating the costs of their services if the patient doesn’t pay.

Independent-minded physicians got into private practice to focus on medical care, not bill collection. Third-party patient financing can help them meet the changing demands of their patients while improving their RCM and weather these stormy times.

Shannon Burke is senior vice president and general manager of health systems, and Greg Pierce is senior vice president and general manager of health and wellness specialty markets for Synchrony.

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